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Cigarette Tax Increase Threatens California Cigar and Pipe Retailers

08/20/02

SACRAMENTO, Calif., Aug. 20 /PRNewswire/ -- Cigar and pipe smokers throughout California are discovering that the retail price of their products will increase by 50% next July if a proposed increase in the state cigarette tax is approved.

California is the only state in the country that directly links the tax rate on cigarettes to its tax rate in cigars, pipe tobacco, and smokeless tobacco. This requirement is part of Proposition 99, passed by the voters in 1988. It has placed the state legislature in a bind as they now consider a tax on cigarettes, knowing that any increase in the cigarette tax further jeopardizes the California's cigar and pipe tobacco industry, already among the highest taxed in the country.
"This will cripple the cigar and pipe tobacco business in California because it will place retail tobacconists at a further economic disadvantage," said Charles Janigian, president of the California Association of Retail Tobacconists. "It will only get worse and you will see stores go out of business." The association maintains that in the end the increased taxation results in less revenue for the state, not more.
Owners of small cigar and pipe shops visited the state Capitol this week urging senators and assembly members to vote against any increased taxes on cigarettes because of the subsequent impact on cigars, pipe tobacco, and smokeless tobacco. Janigian continued, "Most alarming from our standpoint was the number of senators and assemblypersons who were simply unaware of the OTP tax," (the state tax that requires equal tax increase on all tobacco products).
"When Proposition 10 passed in 1998, more than 100 tobacco stores in the state went out of business," states Charlie Hennegan of Liberty Tobacco in San Diego. Linda Squire, owner of The Squire tobacco shop in Santa Rosa, agrees, "If the tax on cigars and pipe tobacco goes up again, I'll simply have to close my doors."